Thursday, July 18, 2024

election predictions, crypto VCs

“If something cannot go on forever, it will stop.” – Herbert Stein  ||

Hi everyone! I hope you’re all doing ok – almost the weekend! 😀

A short newsletter today (for a welcome change!) – I share what I was getting wrong about the likely election outcome, and I look at the role of crypto VCs.

You’re reading the premium Crypto is Macro Now newsletter, where I look at the overlap between the crypto and macro landscapes. I hope you find it useful or informative or even maybe just fun – if so, would you mind sharing it with your friends and colleagues? ❤

IN THIS NEWSLETTER:

• Closer than we think?

• Are crypto VCs necessary?

If you’re not a subscriber to the premium daily, I hope you’ll consider becoming one! You’ll get unique content, interesting links and my eternal gratitude - and there’s a free trial!

WHAT I’M WATCHING:

Closer than we think?

I got a question from a follower yesterday on X that made me realize I was wrong about something: I had been conflating prediction markets with election polls, and the ~65% lead of Trump on crypto betting site Polymarket cemented a Republican landslide win in my mental roadmap.

This person (thank you!) pointed out that the margin of error in polls meant it wasn’t a sure thing, and I almost responded with “there’s no margin of error” – only, there is. I looked up the latest YouGov results, and they’re pretty close. What’s more, according to the polling company’s website, 97% of the responses were collected after the assassination attempt on former president Trump.

(chart via @YouGovAmerica)

You’ve probably seen studies showing that prediction markets tend to be more accurate than polls, which is why I was focusing on those – they adjust real-time, they’re more anonymous (less social shame of telling someone what you actually think), and they tend to be based on binary choices (yes/no, win/lose) which clarifies thinking.

But here’s the thing: the questions are very different.

The prediction markets ask “who do you think will win?”.

The polls ask “who will you vote for?”.

That difference is huge as we all know sane, smart people who think Trump will win but are going to vote for Biden anyway. I personally know many who can’t stand what Biden and his cabal have done to the Democratic Party, but just can’t bring themselves to vote for the Republican Party.

So, I am now aware we need to be careful with our assumptions about the outcome. It could still be a landslide, especially if those who would vote Democrat no matter what just end up staying home on election day because why bother. Or, it could end up being close if Biden hands over to someone else. The tone of his defiance has changed over the past 24 hours, especially as he has now confirmed a COVID diagnosis.

(As an aside, the reports of his diagnosis were run with a video of the president getting on a plane – if that footage was actually from yesterday, where is his mask?)

So, how would markets react should the Democrats win?